European Stocks Fall On Spanish Concerns

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Traders work at their desks in front of the DAX board at the Frankfurt stock exchange
Traders work at their desks in front of the DAX board at the Frankfurt stock exchange January 16, 2012.

European markets fell Thursday as investor sentiment was weighed down by concerns of economic and financial instability in Spain worsening the euro zone economy.

The French CAC 40 index was down 0.33 percent or 11.18 point to 3402.71. Shares of Renault SA fell 1.10 percent and shares of Alstom SA declined 0.89 percent.

London’s FTSE 100 index dropped 0.32 percent or 18.44 points to 5725.09. Shares of Rio Tinto PLC fell 1.95 percent and shares of Kazakhmys PLC declined 1.94 percent.

The German DAX 30 index fell 0.65 percent or 45.89 points to 6964.68. Shares of Daimler AG dropped 1.55 percent and shares of Volkswagen AG declined 1.21 percent.

Spain's IBEX 35 was down 0.44 percent or 32.10 points to 7273.90. Shares of Repsol SA dropped 1.11 percent and shares of Mapfre SA declined 0.83 percent.

According to reports, Spain's Muncia has asked for a financial assistance of 700 million euros ($845 million) from the Spanish government. Also reviving investor concern on the deepening economic instability in Spain, is the report about Catalonia request for an emergency aid of 5 billion euros from the Spanish government.

Spanish Prime Minister Mariano Rajoy will meet French President Francois Holland in Madrid Thursday and the main agenda of their meeting is expected to be the economic crisis situation and measures to be taken by Spain to tackle it.

The National Statistics Institute reported Monday that Spain's economy contracted 0.3 percent in 2010 and grew 0.4 percent in 2011. The Spanish government has estimated that the country's economy will contract 1.5 percent in 2012.

It seems likely that Spain will apply for and receive support from the ECB in time, but the funds that are currently available are unlikely to be enough to solve the country’s problems. Meeting Spain’s financing needs until the end of 2013 would cost about 200 billion euros and doing so until the end of 2014 would raise that to 300 billion euros.

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